China’s deflation, a cause for concern? (GS Paper 3, Economy)
Why in news?
- The Consumer prices in China declined for the first time in over two years in July. The consumer price index declined 0.3% in July from a year earlier, leading to calls for steps to boost demand.
- Producer prices also dropped for the 10th consecutive month, contracting 4.4% in July. This is in contrast to the rest of the world where inflation has been the most pressing problem of late.
What is deflation?
- Deflation is a term that is used these days to refer to a general fall in the prices of goods and services in an economy.
- The definition of deflation, however, has not always remained constant. In the past, the terms inflation and deflation were used to refer to a rise or a fall, respectively, in the money supply rather than a rise or fall in prices.
- A rise in the money supply was expected to contribute to higher prices in the wider economy while a fall in the money supply was believed to lead to lower prices.
Why is it a worry?
- Many economists believe that deflation is a sign of falling demand for goods and services which could lead to a slowdown in economic growth. According to them, the demand for goods and services is the driver of economic growth.
- Falling prices, can also push buyers to postpone their purchases expecting lower prices in the future; this in turn can further dampen demand in the economy, they argue.
- Further, it can lead to business losses and lower growth as costs remain sticky. It can also mess up credit contracts as borrowers will have to pay back lenders more in real terms.
Other side:
- Many economies including the U.S. and China in the past, have experienced deflation during times of rapid economic growth. Even a country like Japan, which has been plagued by persistent deflation for years, actually witnessed a rise in per capita real income levels during the era of deflation.
- Deflation in such cases is the result of a rise in the supply of goods and services that outpaces the rate of money supply growth.
Why is China experiencing deflation?
- China is experiencing deflation at a time when the People’s Bank of China, or the Chinese central bank, continues to keep interest rates low to boost demand in the economy. This is in contrast to other central banks which have been tightening policy to fight high inflation after the Covid-19 pandemic.
- The likely reason behind Chinese deflation may not be the lack of liquidity but rather something more fundamental.
- The Chinese economy has been experiencing turmoil even before the pandemic, in the property sector which contributes to a share of Chinese GDP.
- The Chinese policymakers have been trying to bring about a soft landing of their economy. Credit booms like the one witnessed in China can cause the misallocation of resources and the bust can involve a fall in broader prices.
Russia launches Luna-25 to Moon, targets landing ahead of Chandrayaan-3
(GS Paper 3, Science and Technology)
Why in news?
- Russia recently launched its first moon-landing spacecraft in a bid to be the first nation to make a soft landing on the lunar south pole, a region believed to hold coveted pockets of water ice.A Soyuz 2.1v rocket carrying the Luna-25 craft blasted off from the Vostochny cosmodrome, 5,550 kilometers east of Moscow.
- The lander is expected to touch down on the moon on August 21.
Luna-25:
- Luna-25, roughly the size of a small car, will aim to operate for a year on the moon's south pole, where scientists at NASA and other space agencies in recent years have detected traces of water ice in the region's shadowed craters.
- The primary objective of Luna-25 is to collect samples of moon rock and dust.
- These samples are crucial for understanding the lunar environment before any potential base construction.
- The European Space Agency had planned to test its Pilot-D navigation camera by attaching it to Luna-25, but severed its ties to the project after Russia invaded Ukraine.
Luna-2 mission:
- US astronaut Neil Armstrong gained renown in 1969 for being the first person to walk on the moon, but the Soviet Union's Luna-2 mission was the first spacecraft to reach the moon's surface in 1959, and the Luna-9 mission in 1966 was the first to make a soft landing there.
- Russia then focused on exploring Mars and since the 1991 fall of the Soviet Union, Russia has not sent scientific probes beyond Earth orbit.
Race to Moon:
- Major powers such as the US, China, India, Japan and the European Union have all been probing the moon in recent years. A Japanese lunar landing failed in 2022 and an Israeli mission failed in 2019.
- No country has made a soft landing on the south pole. An Indian mission, Chandrayaan-2, could not make it to the moon as its lander lost communication and subsequently crashed in 2019.
- Rough terrain makes a landing there difficult, but the prize of discovering water ice could be historic, large could be used to extract fuel and oxygen, as well as be used for drinking water.
Presence of water:
- There are signs of ice in the soil of the Luna-25 landing area, this can be seen from the data from orbit.
- With a mass of 1.8 tons and carrying 31 kilograms of scientific equipment, Luna-25 will use a scoop to take rock samples from a depth of up to 15 centimetres to test for the presence of frozen water.
What it hold for Russia?
- This mission is particularly significant as it comes at a time when Russia is facing severe economic challenges and international sanctions due to its ongoing war with Ukraine. Despite these hurdles, Russia's space program remains undeterred.
- The Luna-25 mission is being projected as a symbol of national power and resilience against the West's sanctions, many of which have targeted Moscow's aerospace sector.
- The launch also signifies Russia's growing independence in space exploration after its ties with the West were severed following the invasion of Ukraine in February 2022.
Govt introduces bill to replace CJI with minister in EC selection panel, negates SC order
(GS Paper 2, Governance)
Why in news?
- Recently, the government introduced a bill in the Rajya Sabha that seeks to negate a March 2023 Supreme Court verdict on the selection of the chief election commissioner (CEC) and other election commissioners (ECs) in the Election Commission.
Background:
- The Supreme Court said the selection should be made by the President on the advice of a panel headed by the Prime Minister, and comprising the leader of the Opposition in the Lok Sabha and the Chief Justice of India (CJI).
Highlights of the bill:
- However, the Chief Election Commissioner and other Election Commissioners (Appointment, Conditions of Service and Term of Office) Bill, 2023 seeks to replace the CJI in the panel with a Cabinet minister to be nominated by the PM, thus giving greater say to the central government.
- The bill says that if the leader of the Opposition (LoP) in the Lok Sabha has not been recognised as such, then the leader of the largest party in the Opposition in the Lower House shall be deemed the LoP.
- Currently, the CEC and election commissioners are appointed by the President on the aid and advice of the Council of Ministers. The judiciary does not have any say in the appointments.
Petition before SC:
- Hearing a writ petition from 2015 that sought an independent mechanism to appoint the CEC and election commissioners, a five-judge Constitution Bench headed by Justice K.M. Joseph had said that the founding fathers clearly contemplated a law by Parliament in this respect, and did not intend the executive exclusively calling the shots in the matter of appointments to the Election Commission.
- The ruling said that the process of appointment outlined by the Supreme Court will continue to hold until a law is made by Parliament.
Objects and reasons of the bill:
- The bill’s statement of objects and reasons says that it provides for the appointment and qualifications of the candidates, besides a search committee to shortlist names for consideration by the selection committee.
- It seeks to replace the Election Commission (Conditions of Service of Election Commissioners and Transaction of Business) Act, 1991, which does not contain provisions regarding the candidates’ qualifications, or the search committee.
- The bill states that the CEC and election commissioners shall be persons of integrity, who have knowledge of and experience in management and conduct of elections.
- The process to appoint the CEC and election commissioners will start with a search committee headed by the cabinet secretary and comprising two other members not below the rank of secretary to the Government of India.
- The committee shall prepare a list of five people, who will then be considered for selection by the PM-chaired committee.
- The bill also says that the salary of the CEC and election commissioners shall be the same as those of the cabinet secretary.
Tenure & removal:
- The CEC and election commissioners may, at any time, “by writing under his hand addressed to the President”, resign, the bill says.
- The CEC and election commissioners shall not be removed except in accordance with the provisions contained in clause (5) of Article 324 of the Constitution.
- It suggests no change in the terms of the CEC and election commissioners, saying they will hold office for a term of six years from the date on which they assumed office or until age 65, whichever is earlier.
- The bill also states that the CEC and election commissioners shall not be eligible for re-appointment.
